Digital Commons Network^™

What Google Can't Teach Us About Ipo Auctions (And What It Can), A. Christine Hurt

Faculty Scholarship

No abstract provided.

Regulating Public Morals And Private Markets: Online Securities Trading, Internet Gambling And The Speculation Paradox, A. Christine Hurt

Faculty Scholarship

No abstract provided.

Give Me Equity Or Give Me Death - The Role Of Competition And Compensation In Building Silicon Valley, Richard A. Booth

Working Paper Series

In this essay, I argue that the preeminence of Silicon Valley as an incubator of technology companies is attributable to equity compensation. Ronald Gilson, relying on the work of AnnaLee Saxenian and others who have noted the tendency of Silicon Valley employees to job hop, has suggested that California law prohibiting the enforcement of non-compete agreements was a major factor in the rise of Silicon Valley (and the demise of Route 128). I extend this line of thought by suggesting that California employers may have relied on equity compensation as a substitute way to bind employees. I argue further that …

Materiality And Social Change: The Case For Replacing "The Reasonable Investor" With "The Least Sophisticated Investor" In Inefficient Markets, Margaret V. Sachs

Scholarly Works

The current materiality standard for federal securities fraud is a mid-twentieth-century construct that fails to accommodate certain twenty-first century realities. This Article argues that its reach should be restricted to preserve it for the many circumstances in which it continues to function well.

The current standard measures materiality from the standpoint of "the reasonable investor," a savvy person who grasps market fundamentals. This standard has a fatal flaw: its inability to protect unsophisticated investors who are duped by implausible falsehoods in inefficient markets. This flaw can no longer be ignored given Internet and telemarketing securities fraud and its many unsophisticated, …

Ex Ante Choices Of Law And Forum: An Empirical Analysis Of Corporate Merger Agreements, Theodore Eisenberg, Geoffrey P. Miller

Cornell Law Faculty Publications

Legal scholars have focused much attention on the incorporation puzzle—why business corporations so heavily favor Delaware as the site of incorporation. This paper suggests that the focus on the incorporation decision overlooks a broader but intimately related set of questions. The choice of Delaware as a situs of incorporation is, effectively, a choice of law decision. A company electing to charter in Delaware selects Delaware law (and authorizes Delaware courts to adjudicate legal disputes) regarding the allocation of governance authority within the firm. In this sense, the incorporation decision is fundamentally similar to any setting in which a company selects …

Developing Governance And Regulation For Emerging Capital And Securities Markets, Ali A. Ibrahim

Georgetown Law Graduate Paper Series

No abstract provided.

Insurance Against Misinformation In The Securities Market, Tom Baker

All Faculty Scholarship

Prepared at the request of the Task Force to Modernize Securities Legislation in Canada, this study describes and evaluates evaluate a new capital markets insurance concept: securities misinformation insurance. This new insurance would compensate investors for losses caused by securities law violations. The most powerful objection to this new concept is that investors do not need a new insurance program for securities misinformation losses. Individual and institutional investors already can spread securities misinformation losses by holding a diversified portfolio. Nevertheless, a securities misinformation insurance program has the potential to provide systemic benefits: improved compliance with securities laws (resulting from cost …

Dialectical Regulation, Robert B. Ahdieh

Faculty Scholarship

While theories of regulation abound, woefully inadequate attention has been given to growing patterns of "intersystemic" and "dialectical" regulation in the world today. In this rapidly expanding universe of interactions, independent regulatory agencies, born of autonomous jurisdictions, nonetheless face a combination of jurisdictional overlap with, and regulatory dependence on, one another. Here, the cross-jurisdictional interaction of regulators is no longer the voluntary interaction embraced by transnationalists; it is, instead, an unavoidable reality of acknowledgement and engagement, potentially culminating in the integration of discrete sets of regulatory rules into a collective whole.

Such patterns of regulatory engagement are increasingly evident, across …

Convergence Of Corporate Governance And Islamic Financial Services Industry: Toward Islamic Financial Services Securities Market, Ali A. Ibrahim

Georgetown Law Graduate Paper Series

This paper briefly discusses the significance of corporate governance for the Islamic financial services industry. Furthermore, it predicts that the Islamic financial services industry is likely to converge to modern governance practices. The paper also argues that the industry needs to have a homogenous and specialized regional securities market to realize its true potential.

Measuring Efficiency In Corporate Law: The Role Of Shareholder Primacy, Jill E. Fisch

All Faculty Scholarship

The shareholder primacy norm defines the objective of the corporation as maximization of shareholder wealth. Law and economics scholars have incorporated the shareholder primacy norm into their empirical analyses of regulatory efficiency. An increasingly influential body of scholarship uses empirical methodology to evaluate legal rules that allocate power within the corporation. By embracing the shareholder primacy norm, empirical scholars offer normative assessments about regulatory choices based on the effect of legal rules on measures of shareholder value such as stock price, net profits, and Tobin’s Q.

This Article challenges the foundations of using the shareholder primacy norm to judge corporate …

Using Spread And Net Trading Range To Measure Risk In Suitability Cases, Richard A. Booth

Working Paper Series

Suitability is one of the most common issues that arises in securities arbitrations. Yet it is also one of the most difficult issues to resolve. Up to now there has been no easy and reliable way to compare the risk of one stock or portfolio with another stock or portfolio measured as of the time the investment decision in question was made. As I argued in an earlier article, spread is potentially a promising way to measure risk in real time as perceived collectively by competing market makers. But with the advent of decimal quotes and other recent changes in …

Ain't No Glory In Pain': How The 1994 Republican Revolution And The Private Securities Litigation Reform Act Contributed To The Collapse Of The United States Capital Markets, André Douglas Pond Cummings

Faculty Scholarship

Ain't No Glory In Pain recalls the deregulatory legislation adopted by the 104th Congress in 1995 and 1996, including the shareholder lawsuit limiting Private Securities Litigation Reform Act (PSLRA) and connects several of those measures with the historic corporate malfeasance that marked the capital market collapse of 2001-02. I propose, in the face of recent calls for further efforts to deregulate crucial industries and further hamstring shareholder lawsuits, that Congress and the SEC work together to reject certain provisions of the PSLRA and act in ways to ensure investor protection in this post-Enron/WorldCom environment.

Compensating Power: An Analysis Of Rents And Rewards In The Mutual Fund Industry, William A. Birdthistle

All Faculty Scholarship

The allegations of malfeasance in the investment management industry - market timing, late trading, revenue sharing, and several others - involve a broad range of mutual fund operations. This Article seeks to explain the common source of these irregularities by focusing upon a trait they share: the practice of investment advisers' capitalizing upon their managerial influence to increase assets under management in order to generate greater fees from those assets. This Article extends theories of executive compensation into the context of investment management to understand the extraction of rents by mutual fund advisers. Investment advisers, as collective groups of portfolio …

Overvalued Equity And The Case For An Asymmetric Insider Trading Regime, Thom Lambert

Faculty Publications

This article argues for an asymmetric insider trading policy under which insider trading that decreases the price of an overvalued stock is generally permitted, but insider trading that increases the price of an undervalued stock is generally prohibited. Concluding that the net investor benefits of price-decreasing insider trading exceed those of price-enhancing insider trading, the article argues that an asymmetric insider trading regime likely represents the bargain that shareholders and corporate managers would strike if they were legally and practically able to negotiate an insider trading policy. Current insider trading doctrine would permit regulators to impose such an asymmetric insider …

The Supreme Court’S Decisions In Arthur Andersen And Dura Pharmaceuticals, Charles W. Murdock

Faculty Publications & Other Works

No abstract provided.

Nationalizing Ethical Standards For Securities Lawyers., Michael J. Kaufman

Faculty Publications & Other Works

No abstract provided.

When Does The Securities Litigation Uniform Standards Act Of 1998 Preempt State Law Claims?, Steven A. Ramirez

Faculty Publications & Other Works

No abstract provided.

Reflections On Scienter (And The Securities Fraud Case Against Martha Stewart That Never Happened), Donald C. Langevoort

Georgetown Law Faculty Publications and Other Works

This paper considers what research in cognitive psychology and behavioral economics has to say about one of the basic "state of mind" constructs in the law of fraud: scienter. It takes a clinical approach, examining the securities fraud case that never happened against Martha Stewart. In granting a judgment of acquittal in Stewart's favor on the securities fraud charge, the court seemingly misunderstood the law of scienter, which turns on awareness rather than purpose. But that simply provides an opportunity to think about what awareness means in the context of financial transactions. From publicly available sources, interesting inferences can be …

Europe's Thirteenth Directive And U.S. Takeover Regulation: Regulatory Means And Political Economic Ends, Marco Ventoruzzo

Journal Articles

Cross-border acquisitions, especially through hostile takeovers, represent one of the most dramatic consequences of the growing integration, both within Europe, and when considering the economic balance of power between the US and the European industries. This Article focuses on the single most important piece of legislation on European takeover law, the Thirteenth Directive of the European Union on Takeover Regulation, which was approved on April, 21 2004 and must be implemented by Member States before the end of 2006.

Passage of the Thirteenth Directive is no minor event. Earlier versions were embroiled in arresting political controversies that generated significant Member …

The Missing Monitor In Corporate Governance: The Directors' & Officers' Liability Insurer, Tom Baker, Sean J. Griffith

Faculty Scholarship

This article reports the results of empirical research on the monitoring role of directors' and officers' liability insurance (D&O insurance) companies in American corporate governance. Economic theory provides three reasons to expect D&O insurers to serve as corporate governance monitors: first, monitoring provides insurers with a way to manage moral hazard; second, monitoring provides benefits to shareholders who might not otherwise need the risk distribution that D&O insurance provides; and third, the "bonding" provided by risk distribution gives insurers a comparative advantage in monitoring. Nevertheless, we find that D&O insurers neither monitor corporate governance during the life of the insurance …

After Dura: Causation In Fraud-On-The-Market Actions, Merritt B. Fox

Faculty Scholarship

On April 19, 2005, the Supreme Court announced its unanimous opinion in Dura Pharmaceuticals, Inc. v. Broudo, concerning what a plaintiff must show to establish causation in a Rule lob-5 fraud-on-the-market suit for damages. The opinion had been awaited with considerable anticipation, being described at the time of oral argument in the Financial Times, for example, as the "most important securities case in a decade." After the opinion was handed down, a representative of the plaintiffs' bar lauded it as a "unanimous ruling protecting investors' ability to sue." A representative of the defendants' bar equally enthusiastically hailed it as "a …

The Essential Role Of Securities Regulation, Zohar Goshen, Gideon Parchomovsky

Faculty Scholarship

This Article posits that the essential role of securities regulation is to create a competitive market for sophisticated professional investors and analysts (information traders). The Article advances two related theses – one descriptive and the other normative. Descriptively, the Article demonstrates that securities regulation is specifically designed to facilitate and protect the work of information traders. Securities regulation may be divided into three broad categories: (i) disclosure duties; (ii) restrictions on fraud and manipulation; and (iii) restrictions on insider trading – each of which contributes to the creation of a vibrant market for information traders. Disclosure duties reduce information traders’ …

Tattlers And Trail Blazers: Attorneys' Liability For Clients' Fraud, Barbara Black

Faculty Articles and Other Publications

No abstract provided.

Cataclysmic Liability Risk Among Big Four Auditors, Eric L. Talley

Faculty Scholarship

Since Arthur Andersen's implosion in 2002, policymakers have been encouraged with ever increasing urgency to insulate the auditing industry from legal liability. Advocates of such insulation cite many arguments, but the gravamen of their case is that the profession faces such significant risk of cataclysmic liability that its long term viability is imperiled. In this Essay, I explore the nature of these claims as a legal, theoretical, and empirical matter. Legally, it is clear that authority exists (within both state and federal law) to impose liability on auditing firms for financial fraud, and courts have been doing so sporadically for …

Remapping The Charitable Deduction, David Pozen

Faculty Scholarship

If charity begins at home, scholarship on the charitable deduction has stayed at home. In the vast legal literature, few authors have engaged the distinction between charitable contributions that are meant to be used within the United States and charitable contributions that are meant to be used abroad. Yet these two types of contributions are treated very differently in the Code and raise very different policy issues. As Americans' giving patterns and the U.S. nonprofit sector grow increasingly international, the distinction will only become more salient.

This Article offers the first exploration of how theories of the charitable deduction apply …

Federalism In Corporate/Securities Law: Reflections On Delaware, California, And State Regulation Of Insider Trading, Donald C. Langevoort

Georgetown Law Faculty Publications and Other Works

In this brief Essay, I offer some thoughts on both the theory and the politics underlying the federalism question. My comments will touch on some of the controversies and also look at a somewhat quieter question, the state regulation of insider trading. Over the course of the last few years, judges in California and Delaware have traveled markedly different routes on questions involving the states' role in regulating insider trading. A California court of appeal has recently expanded the reach of the state insider trading statute to cover a claim alleging misconduct in California by an executive of a Delaware …

Regulating The Mutual Fund Industry, Donna M. Nagy

Articles by Maurer Faculty

With virtually every other household in the United States invested in mutual funds, effective and efficient regulation of the mutual fund industry must be a top national priority. But the creation of a new private regulator - whether along the lines of SROs such as the NASD and NYSE or the recently created PCAOB - would be a step in the wrong direction. Instead, much more can be gained from strengthening the SEC's longstanding role as the principal overseer of mutual funds and improving other aspects of the existing regulatory regime.

Well-Known Seasoned Issuers In Canada, Adam C. Pritchard

Other Publications

The United States Securities and Exchange Commission (SEC) recently adopted a series of rules relaxing the restrictions imposed on public offerings. The largest public companies - defined as “well-known seasoned issuers” (WKSIs) - received the most extensive regulatory relief. Canada could adopt a version of WKSI status for the top tier of Toronto Stock Exchange (TSX) issuers as part of a streamlined POP system.

Careful consideration must be given, however, as to the appropriate standards for WKSI status in Canada. The standards adopted in the U.S. – US$700 million in market capitalization or US$1 billion in nonconvertible debt issued over …

The Irrational Auditor And Irrational Liability, Adam C. Pritchard

Articles

This Article argues that less liability for auditors in certain areas might encourage more accurate and useful financial statements, or at least equally accurate statements at a lower cost. Audit quality is promoted by three incentives: reputation, regulation, and litigation. When we take reputation and regulation into account, exposing auditors to potentially massive liability may undermine the effectiveness of reputation and regulation, thereby diminishing integrity of audited financial statements. The relation of litigation to the other incentives that promote audit quality has become more important in light of the sea change that occurred in the regulation of the auditing profession …

Does The Plaintiff Matter? An Empirical Analysis Of Lead Plaintiffs In Securities Class Actions, Randall Thomas, James D. Cox

Vanderbilt Law School Faculty Publications

The PSLRA's lead plaintiff provision was adopted in order to encourage large shareholders with claims in a securities fraud class action to step forward to become the class' representative. Congress' expectation was that these investors would actively monitor the conduct of a securities fraud class action so as to reduce the litigation agency costs that may arise when class counsel's interests diverge from those of the shareholder class. Proponents of the provision claimed that there would be substantial benefits from having institutional investors serve as lead plaintiffs. Now, ten years later, the claim that the lead plaintiff is a more …